Home Capital looking to double portfolio

by
Donald Horne |
27 May 2013

Tough times only for some.

Home Capital Group actually plans to double its book by taking on customers turned away by the big banks.

“There are a lot of situations where people would have been qualified with the banks and they have been shifted to us,” Home Capital CEO Gerald Soloway told Bloomberg news. “With mortgage tightening, it’s not economical for a thousand-branch bank to do what we do. We’re small and quite centralized, so it works for us to put the skill and time into each loan.”

The nation’s largest non-bank mortgage lender is looking to increase its assets to $40 billion in the next four years from the current $20.4 billion, Soloway said.

The opportunity for alternative lenders to increase their book was thrown wide open last spring when Finance Minister Jim Flaherty tightened the mortgage rules for the fourth time in the last five years, forcing banks to become more selective in who they approved.

Home Capital will be expanding in St. John’s and Montreal, concentrating on the self-employed and new-immigrant markets.

Analysts at Macquarie Capital Markets predict that investors will see Home Capital as a stock worth investing in, as many still expect a major correction in the Canadian housing market is yet to come.

Numbers from the Canadian Real Estate Associaton show that the average residential price has climbed about 140 per cent over the past 13 years, prompting many to bet on an eventual collapse of the Canadian housing market. Some economists, like David Madani at Capital Economics, forecast home prices to drop as much as 25 per cent by 2014/2015.

Julie Dickson, OSFI superintendent, told delegates at the Bloomberg Canada Economic Summit that the effect of low interest rates on banks has become a “significant area of focus”, and OSFI will be reviewing its guidance to banks on mortgages of more than 25 years.

To hit their goal I think they will have to work in areas that they have shied away from in the last 5 years. In my area that would have been in southwestern Ontario. Normally their territory ended at London and they wouldn't look at Windsor, Leamington, Chatham.